SC says NTC has jurisdiction over access charges between telcos

The country’s telecommunications policy law, Republic Act 7925, does not strictly adopt a laissez faire policy on activities of public telecommunications entities (PTEs) when they enter into bilateral agreements with each other.

This is according to the Supreme Court in a case it decided involving a dispute between Philippine Telegraph and Telephone Corp. (PT&T) and Smart Communications over access charges.

Penned by SC associate justice Francis H. Jardeleza, the high court’s Third Division promulgated the decision last Nov. 9. The decision said RA 7925 imposes strictures that restraint within reason on how PTEs – also known as telcos — conduct their business.

Thus, it ruled that the National Telecommunications Commission (NTC) has primary jurisdiction over the dispute between PT&T and Smart Communications in their disagreement over the fairness of the access rates charged by the latter on the former.

Dissolved by the SC decision was the writ of injunction the Makati City Regional Trial Court (RTC) had issued on April 25, 2006 against the NTC and PT&T. The temporary restraining order had to do with the complaint PT&T had filed before the NTC on Sept. 15, 2005 against Smart Communications.

The complaint alleged that Smart Communications had allegedly been overcharging PT&T on outbound calls to Smart Communications’ Cellular Mobile Telephone System (CMTS). Such overcharging was “discriminatory and not in conformity with other carriers,” the complaint said.

This led the NTC on January 20, 2006 to order the two telcos to settle their dispute through mediation talks. The efforts having failed, the NTC then directed PT&T and Smart to file their respective pleadings for the government office’s resolution of the case.

Before either company could file its respective pleadings, Smart went to the Makati City RTC to file on April 7, 2006 to file a civil suit against PT&T to demand payment of its debt due to access charges. In doing so, it charged PT&T with breach of contractual obligations.

It also sought a writ of preliminary injunction against the NTC and PT&T with regard to the former’s actions on the dispute.

In its decision, the SC said RA 7925 seeks to break up the monopoly in the telecommunications industry by gradually dismantling the barriers to entry and granting new industry entrants protection against dominant carriers through equitable access charges and equal access interconnection agreements and through the strict policing of predatory pricing by dominant carriers.

In this dispute, the court said Smart Communications could not simply invoke the freedom of contract to shield it from intervention by the NTC, “especially when the law sanctions its intervention.”

Because PT&T and Smart Communications are both subject to regulation the NTC,” their freedom to enter into contracts is not absolute but subject to the police powers of the State, especially when it comes to matters affecting the public interest and convenience,” according to the decision.

It said, “Congress gave the NTC broad powers over interconnection matters in order to achieve the goal of universal accessibility.”

The legal dispute between PT&T and Smart Communications had its origins in an agreement the two PTEs on June 25, 1997. The contract called for an interconnection of their respective telecommunications facilities.

Smart’s CMTS, Local Exchange Carrier (LEC) and paging services would interconnect with PT&T’s LEC service. Beginning in 1999, PT&T found difficulties in meeting its financial obligations to Smart Communications.

This prompted the two firms to amend their agreement on Nov. 28, 2003. PT&T’s payment period was extended and was allowed to settle its financial obligations on an installment basis.

The amended terms stipulated that Smart Communications would increase its charge to PT&T from P1.00 to P2.00 once PT&T’s unpaid balance reached P4 million. At the same time, PT&T’s access charge from P8.69 to P6.50. Upon full payment of the balance, PT&T’s access charge would be reduced further to P4.50.

Smart Communications then sent a letter on April 4, 2005 informing PT&T that it had increased the access fees it charged PT&T from P1.00 to P2.00 and such charges took effect April 1 that year. It claimed such increase would be in accordance with their Nov.28, 2003 agreement.

On September 2 that year, PT&T sent Smart Communications a letter claiming that the latter had been overcharging on outbound calls to Smart Communications.

In its letter, PT&T cited an NTC resolution regarding a separate dispute between Smart Communications and Digitel. In this dispute, the NTC disallowed the charges it had imposed on Digitel, saying the charges had been discriminatory and offered less favorable terms than those it had given other telcos. The letter also demanded that Smart Communications give it a refund of P12,681,795.13.

In September 15 of that year, it sent a complaint letter against Smart to the NTC and set the stage for Smart Communications going to the RTC to file a civil suit and seek a Writ of Preliminary Injunction on NTC’s examining the case.

Before the Makati RTC, Smart Communications alleged that PT&T had breached its contractual obligation when it failed to pay its outstanding debt and denied its liability to Smart. It asked the court to order PT&T to pay its unpaid obligation of P1,3897,742.33 and comply with the terms of the agreement.

PT&T countered by seeking the dismissal of Smart’s civil case against it. Its reasons were the following:

• Lack of jurisdiction by the RTC
• Non-observance by the RTC of the doctrine of non-jurisdiction
• Exhaustion of administrative remedies
• Litis Pendentia
• Res Judicata

Many hearings later, the Makati RTC decided the case in Smart Communications’ favor even as it issued the requested TRO. The Makati RTC reasoned:

• The nature of the civil case was incapable of pecuniary estimation which squarely falls within its jurisdiction

• The NTC had no jurisdiction over breach of contract cases

PT&T elevated its case to the Court of Appeals through a petition for certiorari, but was denied. It then went to the SC for a review of the case. PT&T’s arguments before the high court were the following:

• NTC had primary jurisdiction over the determination of access charges

• The NTC case involved validity of access charges, as opposed to one involving purely a breach of contract and claim for damages cognizable by the RTC

• The writ of preliminary injunction against the NTC constitute interference with a co-equal body

Smart Communications’ counter-arguments were the following:

• The dispute was purely contractual and therefore properly fell within the RTC’s jurisdiction

• Although the agreement contained technical terms, NTC had no jurisdiction over bilateral interconnection agreements negotiated and entered into by the telcos

In its decision, the SC said it cannot agree with Smart’s position. It pointed out Section 12 of RA 7925 regulates access charge arrangements between two PTEs and such agreements would have to be submitted to the NTC.

It quoted the section which said, “In the event the parties fail to agree therein within a reasonable period of time, the dispute shall submitted to the Commission [NTC] for resolution.

Proceedings by the NTC on such disputes were quasi-judicial and pointed out that the courts could not interfere with the judgments, orders or decrees of a court of concurrent or coordinate jurisdiction.”

“This rule of non-interference applies not only to courts of law having equal rank but also to quasi-judicial agencies statutorily at par with such courts,” the SC stressed.

It said that with respect to its quasi-judicial functions, the NTC is the equal of the RTC. A contrary ruling on this matter would affect the NTC’s ability to protect consumers and promote consumers’ welfare.

“Access charges directly affect the State’s goal of making basic telecommunications services accessible to everyone at affordable rates. The costs to end-users would be prohibitive,” the decision said.

It said the RTC could only proceed with the civil case Smart Communications had filed against PT&T only after the NTC had finally determined if the access charges were fair and reasonable.

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